Budget gap swelled to P660.2B in ’19
The government last year spent more on public goods and services than it ought to even as tax and nontax collections fell slightly short of target, resulting in a P660.2-billion budget deficit that breached the target for 2019.
The latest Bureau of the Treasury data released on Thursday showed that the national government’s expenditures last year reached P3.79 trillion, up 11.4 percent from P3.41 trillion in 2018 and exceeding the P3.77-trillion program for the year.
“Expenditures sped up despite the delay in the approval of the 2019 budget as line agencies caught up with spending toward the latter part of the year,” the Treasury explained in a statement.
The government underspent P1 billion a day between January and April last year when it operated using reenacted 2018 appropriations. It later rolled out a catch-up spending program to offset the slower economic growth during the first half of 2019.
Full-year 2019 gross domestic product (GDP) growth slid to an eight-year low of 5.9 percent mainly due to the late budget implementation.
But during the month of December alone, Treasury data showed that disbursements jumped 57.8 percent year-on-year to P494.4 billion.
The Treasury attributed the climb in government expenditures last December to “strong infrastructure spending of the Department of Public Works and Highways, implementation of social protection programs and services of the Department of Social Welfare and Development, and personnel services expenditures with the grant of the service recognition incentive, payment of pension and retirement benefits as well as requirements for the creation and filling of positions in various agencies.”
So-called productive spending or disbursements (excluding interest payments for the government’s outstanding debt) rose by a faster 12.3 percent to P3.44 trillion in 2019.
Interest payments inched up 3.3 percent to P360.9 billion but below the P399.6-billion program for last year, resulting in P38.7 billion in savings for the government, thanks to “coupon payments for outstanding debt as well as foreign exchange and LIBOR rate adjustments,” the Treasury said.
On the other hand, total tax and nontax revenues in 2019 reached P3.14 trillion, just 0.4-percent below the P3.15-trillion goal.Last year’s revenues nonetheless grew by more than a tenth from P2.85 trillion in 2018.
Tax revenues increased 10.2 percent to P2.83 trillion, but still below the P2.96-trillion target.
Nontax revenues not only rose 8.9 percent to P309.7 billion but also exceeded the P194.2-billion program by almost three-fifths.
As expenditures surpassed the program while revenues fell below goal, last year’s budget deficit was 6.5-percent bigger than the P620-billion cap equivalent to 3.25 percent of GDP. The 2019 fiscal deficit was equivalent to 3.55 percent of GDP.
For ING senior economist Nicholas Antonio Mapa, the 2019 fiscal performance showed that “the slowdown of GDP [growth] in 2019 was not due to lack of government spending.”
“The strong spending to close out the year would likely lead to an upward revision to 2019 GDP with full-year growth probably realized at 6 percent. The surprise surge in spending in December is reflected in the aggressive borrowing stance of the Treasury of late and we can expect this behavior to continue given the concurrent 2019 and 2020 budgets running parallel this year,” Mapa said in a note to clients on Thursday.
“With the COVID-19 virus expected to curb household spending in the coming months, we expect the fiscal front to help insulate the economy with strong spending likely to continue in the first half of 2020,” Mapa added.
